Nearly a dime’s worth of days into the New Year, this is no time to rehash what happened in the last Congress. A new Congress—the 114th of our maturing nation—is now underway. And what a new Congress it is.

Republicans now rule Capitol Hill and veteran Senate Democrats are being reminded of how it feels to be called Minority. (Republicans have held the majority in the House and Senate more often than not in the previous 10 congresses, since 1995.) At the other end of the avenue is a president who has confronted more than his share of domestic and international crises. January is the starting gun for his latest test – working with the 114th Congress and its routinely unfriendly and uncooperative Republican membership. In that respect, so far, there is not much new about this Congress.

The leaders in the House and Senate themselves face internal and external challenges as they assume on behalf of their caucuses the collective role of governing. Politico used apt “cliff” and “landmine” metaphors for what faces Speaker Boehner (R-OH) and Majority Leader Mitch McConnell (R-KY) as they advance legislation through their own caucuses. The leaders know that the GOP is well positioned to turn around the “do-nothing Congress” label that the Republicans made possible—even intended—over recent years. (Yes, the dethroned Harry Reid hardly facilitated the legislative process in the Senate but Messrs Boehner and McConnell are faced with colleagues in the rank and file who came to Washington to stand in the way of government. Twelve Republicans found reason to vote against returning Boehner to the Speaker’s chair, as if he is didn’t well serve the cause(s) of conservative Republicans.) This go-round Democrats, with little control over committees, the bills they produce, and the floor schedule, will not be plausible scape goats for a failure to legislate. And in the Senate McConnell may be 6 votes shy of a filibuster proof majority but he has a pool of moderate Dems and an Indie who are potential “ayes,” such as we will see with the upcoming Keystone XL vote.

The success of a legislature is measured by legislative productivity. Can this Congress be productive with the Obama White House, which has vetoed exactly two bills in the past six years?

As previously noted, President Obama also will be tested. How well he will deal with the new Congress, his constitutional partner in making law? No doubt we will see more vetoes in his last two years in office but his legacy will depend more on what is accomplished than what he blocked.

In other words, they need each other. Few points will be awarded if progress is not seen in Washington. So, the question is whether the president can find within him the resolve of Bill Clinton, who famously made lemonade out of the GOP blowout of 1994, and whether the Republicans will function as if they want to be remembered as the “did-something Congress.”

All of that is background to a rundown of just some of the issues and questions that are of interest to the port/maritime industry and the larger freight sector.

The president put his previously stated policy view into surprise policy action with his late December announcement on normalizing diplomatic relations with Castro’s Cuba. Any number of ports, exporters and others were pleased by the news. There is bipartisan support among some in the House and Senate but Congress will either come down hard on the White House initiative or, rhetoric aside and with an eye on what Castro might do in the months ahead, show a willingness to reconsider the long-standing trade embargo that can only be ended by a change in law.

Last year, Congress came close to hitting the “target” of spending $1.2 billion from the Harbor Maintenance Trust Fund. The enacted water resources law (WRRDA 2014) sets ambitious, incrementally higher targets for Congress to meet with funding for channel maintenance and other work authorized to be supported by trust fund monies. Will the Republicans, as the saying goes, “put trust back in the trust fund” or continue to allow the Harbor Maintenance Tax assessment on cargo to be used as general revenue applied against the Federal budget deficit?

Last year the House and Senate produced a “sense of Congress” statement generally in support of the US-flag and Jones Act sectors. It can be interpreted as reaffirming existing maritime policy. Around the same time John McCain (R-AZ) reaffirmed his own maritime policy to undo the Jones Act in a speech to the Heritage Foundation. He and the petroleum industry actively urge changes to current law, which is to say, the end of the Jones Act. Meanwhile the Maritime Administration and the Secretary of Transportation will steer a draft National Maritime Strategy through the policy and political wringers of the White House. What will that document say about Administration policy and what if anything needs to be done to improve the US merchant marine or American ports?

In 2015 Congress will have to tackle surface transportation policy and funding. Will it include real money to renew freight corridors and build new infrastructure to support modern, intermodal commerce? Will Congress bite the bullet and find the money to pay it or, for that matter, to save the failingHighway Trust Fund? Past refusal by Congress to tackle this issue has depressed road and transit funding and been a principal expression of austerity economics—advocated by most Republicans, but abetted by many Democrats who also have avoided new revenue proposals—during a time when the country was climbing its way out of The Great Recession. Should this Congress produce a transportation bill that only perpetuates an inadequate level of funding and papers over the structural deficiencies of Highway Trust Fund financing it will not make for a convincing accomplishment.

The issues that may arise in the new Congress are many. Committees are establishing their work plans for the year ahead. What will the Republican majority serve up in the way of budget cuts and appropriations? Will a uniform ballast water policy finally become law? Will the TWIC reader rule that seems to assume container terminals to be at a lesser risk be implemented without alteration? How will Title XI vessel financing fare and will marine highway policy wither from inattention? Will Congress see a Federal role in helping ports, cities and businesses plan for rising sea levels and assist in improving waterfront infrastructure for the coming decades? Will the Coast Guard prepare helpful guidance and rules on cybersecurity and will the industry actively engage in developing it? Will Federal policy foster clean fuel initiatives for the freight modes and encourage off-shore wind energy development? How will the committees answer shipper complaints about railroads? Will a Republican Congress and a White House Democrat come to terms on tax reform, infrastructure funding, and trade policy?

At bottom, how well do the legislators of the new Congress—both Republicans and Democrats—understand, and how will they respond to, these and other issues of relevance to the port/maritime sector? Pbea

I filed a version of this with the good folks at the Connecticut Maritime Coalition whose Deep Water Port notes newsletter carries my perspectives from Washington…

A few years back the trade press started asking from their columns and story headlines why it was taking so long for marine highway progress—on the water and in government. To some extent the questions “why” and “when” reflected skepticism and an understandable response to some of the slam-dunk rhetoric that advocates used in the first years of the last decade. The advocates’ logic was simple: Roads are congested; water is not. New highways are expensive; water is free.

Of course, it’s not that simple. (Just as the argument that Jones Act = No Marine Highway is too pat a dismissal.)

On the business side it doesn’t help that the economy went into the tank. Cargo and freight volumes dropped. Capital became scarce. People and companies ducked into secure holes, stopped spending and started stuffing the mattress. Then there was the rapid rise of diesel prices only to drop just as marine efficiencies started to look attractive.

But that hardly explains it all. Modal shifts don’t happen on a dime. Yes, trucking has its challenges but driver shortages and HOS regs alone don’t steer companies to the water. Besides, intermodal rail has been doing very well and can be expected to be even more competitive in offering services to trucking.

One thing is simple: marine highway service has to make sense in economic and logistics terms to the folks who control the cargo. Some truckers and shippers have said in public forums how water transport does make sense for their businesses. They even qualify as MH advocates. Their numbers can and will grow but more needs to be done to make the prospect for marine highway service more real and the information more available.

A few more operations on the water could make a difference. The long awaited M-580 “Green Trade Corridor” COB service between Stockton and Oakland will be up and running in a couple months. On the government side of things we also will see some steps that could make a difference.

In early February House Ways & Means will hold a hearing on maritime tax issues including a Harbor Maintenance Tax exemption for domestic moves of non-bulk cargo and the tonnage tax, which presently can frustrate the start of marine highway services. The chair of the subcommittee, Pat Tiberi (R-OH), is also sponsor of the exemption bill, HR 1533.

Related to that is the pending House Surface Transportation bill that may carry the HMT exemption legislation in a first ever “maritime title” in a surface transportation authorization bill.

The Navy/MARAD “dual use” project should get interesting in the coming months. Herbert Engineering’s October 28th report for MARAD, coordinated with market and operation studies, is a guide to vessel designs that could work for the commercial and, when needed, national defense markets. The strategy to replace the tired RRF with new, commercially viable ships is hinged on MH development taking off. New incentives to help marine highway services to capitalize and get off the ground may be part of a dual use package considered within the Administration.

The M-580 project benefited by Federal capital grant money as have some other MH related projects. Don’t expect marine highway program grants to be issued this or next year but USDOT is announcing a 4th round of TIGER grants (Notice of Funding Availability to be published January 31, 2012.) Watch for MH related proposals.

Also, let’s not forget that the MARAD funded market/business plan studies for M-5, M-55 and M-95 corridors are to be released in the next few months.

None of the above presently qualifies as full fledged game changers but the potential is there. There is more to come on the marine highway story in 2012. Pbea

If we’ve learned anything about the developing American marine highway it is that it is developing incrementally and slowly. A few nice-sized steps but no big leaps.

I have little doubt that the market will eventually demand greater use of the marine mode for domestic goods movement as the limits of landside capacity reach an economic tipping point and the imperative strengthens to use less fuel and produce fewer emissions. But the question to ask is whether it is wise to wait. In 2007 Congress answered the question…sort of.

In a multi-faceted “energy independence and security” bill the energy efficiency of the marine mode was recognized. With the signing of Public Law 110-140 Washington said that it would be to the nation’s benefit to make greater use of coastwise and inland marine transportation. The U.S. Department of Transportation was handed a program outline and a few tools. It was told to return to Congress with recommendations as to any additional things that might be done to make it work. (No report as yet.) Then in 2009 Congress gave its approval to a grant program and appropriated a modest sum of $7 million. [Note: since this writing grants were awarded.]

This year USDOT finally stepped up to implement that new policy and program. In August some projects were designated as eligible for grant funding and others were identified as “initiatives” to be encouraged.

The starting gun sounded on the American Marine Highway program…thus also signaling one of very few opportunities to improve the outlook for U.S. flag shipping.

There’s much to be done here in Washington. Federal funding is not the be-all and end-all of the marine highway program but it is crucial. Funding is how policy intent is measured in Washington. Is the $7 million the start of a serious effort or just flash-in-the-pan funding? Without an AMH budget for the Maritime Administration it will not have the program and staff resources to do much of anything in the next years. Without funding for AMH grants the Federal program will seem toothless. States and other transportation planners will ignore it. Start-ups may go only a short distance for lack of resources to secure that needed barge or crane.

Likewise, the policy provisions signed by President George W. Bush in 2007 are just a toe in the door. The next Congress should look more deeply into how marine highways can contribute to the overall transportation system and then decide what to do about it and the shipyard infrastructure needed to support it. I think there is plenty the legislature and this change-minded administration can do about it.

The next year or two will be a critical period that will decide if the new marine highway policy is to be taken seriously. Grant funding in FY 2011, commencing October 1, is unlikely, but it need not be a serious blow to the marine highway effort. For starters, we need to work to secure funding in the FY2012 budget and strengthen interest among policy makers.

Progress in the next years may continue to come in small increments along with an occasional large step. It is not easy to turn around business thinking about logistics or change attitudes in government about the role of domestic waterborne shipping but it can be done. Whether the marine highway effort in Washington falters or advances will depend on how strong and effective is the advocate crew…those of us who want to see more stars and stripes flying on the water. Pbea

The lead on the June 21st American Shipper story caught the eye. The chair of the House Subcommittee on Coast Guard and Maritime Transportation “says government programs aimed at helping the U.S.-flag fleet ply foreign trades have been a failure.”

“We have frankly struggled to find the policy that would truly improve and strengthen the U.S. marine transportation system…that would ensure we continue to have a robust merchant marine,” said Chairman Elijah Cummings (D-MD) in a private session with the Federal Maritime Commission.

Administrator Matsuda cited numbers that summarize the industry’s decline. He noted that the once substantial U.S. merchant fleet “created many of the technological innovations now used by the rest of the world” then stated this depressing fact: “However, U.S. maritime programs have not been successful in inducing or even maintaining capacity within the Nation’s domestic merchant marine. “

Chairman Cummings told Matsuda, “We…should work to formulate a meaningful U.S. maritime policy that will revitalize our merchant marine and expand the percent of U.S. trade carried in U.S. ships.” He wanted the MARAD to return with some ideas.

Given how long it is taking USDOT to unveil long overdue surface transportation recommendations–in part due to the White House aversion to talking revenue measures–one might imagine the subcommittee chairman waiting a little while for a new administration maritime initiative.

Here’s an idea. Suggest to Congress that the place to start revitalizing the U.S. merchant marine is here in U.S. waters. Rather than try to formulate a new policy by which U.S.-flag shipping can be competitive in the Asian trade, we should develop an ambitious initiative for the nascent and inadequately resourced American Marine Highway program here at home.

It is good to hear Chairman Cummings raise his concerns. Whatever can be done to invigorate the U.S.-flag sector is worth considering. It certainly is long overdue.

I will borrow words used by former Secretary Norman Mineta in a December 2007 speech about the broader U.S. maritime sector. “Compared to the resources and focus that we have devoted to surface transportation and aviation,” Mineta said after having left the cabinet office, “I believe we must quickly and dramatically increase our attention, our funding, and our national purpose with respect to maritime issues.”

If there is an obvious opportunity to revitalize the maritime sector–one of this country’s earliest industries–it is in the short sea market, primarily the Jones Act trade, as part of a smart energy/environment/transportation policy framework. If there is a way to give new life to the merchant fleet and bring U.S. shipyards to produce vessels for a new, greener generation it is through an expanded domestic market and a policy that takes the maritime sector half as seriously as Washington has taken other sectors of the economy. Many of us would settle for half. Pbea

David Matsuda –the President’s pick to serve as Maritime Administrator–is ready to serve.

He returned to familiar turf this week when he appeared at his nomination hearing. He worked for the same committee that will be voting on his nomination. His work in the Senate had to do with railroads, ports, transit, trucking and aviation. He worked for a senator whose state’s second largest employment sector is logistics and which is host to the New York Harbor and Delaware River gateways.

Since mid 2009 David Matsuda has been running the Maritime Administration as the top political appointee at the modal agency. He has the confidence of Transportation Secretary Ray LaHood who first knew him as Deputy Assistant Secretary for Policy.

Importantly for MARAD–and for the marine transportation system–he has knowledge and experience to help shape a new transportation policy for the administration to recommend to Congress. That transportation policy has to include, for the first time, a national freight policy. And by rights it should put the marine transportation system squarely in that policy.

David Matsuda’s prepared statement for the hearing was brief and straightforward. He reminded the committee that the “impacts of our nation’s maritime industry are not limited to coastal states.”

“Items brought in by ship make their way to store shelves and factory lines throughout the nation. Some raw materials we mine, goods we produce, and agricultural products we grow for export leave through our seaports or travel down rivers or across great lakes to distant markets. In all, 36 states have a maritime port—whether it’s on a river, lake, gulf, or ocean. Merchant mariners live in just about every state in the Union, and midshipmen nominated by you and your colleagues to study at the U.S. Merchant Marine Academy can claim home to all but one state. Some states have shipyards or marine manufacturers which can be the largest sources of jobs in an entire community or region.”

He noted acknowledged the challenges.

“Today’s industry is struggling with many tough challenges: a lagging economy, climate change, the threats of invasive species, piracy and other security issues, a greatly expanded Panama Canal opening in 2014, and an aging workforce, to name a few.”

One of the challenges facing the next Administrator is to make something of the marine highway program. It is just getting started. With no assurance of a reliable funding stream for the program, MARAD–hopefully with strong support from the Secretary’s office–will have to make the most of its modest resources to develop a credible and creative program that will be central to MARAD’s mission for many years to come.

“I feel my experience working within the federal government, and especially working in the Senate, has allowed me a broad understanding of how these challenges can be approached successfully: by working with all stakeholders in good faith and with transparency in decision-making.”

Jim Kruse and colleagues at the Texas Transportation Institute (TTI) completed a study that identifies obstacles to marine highway development. It’s a good report. At least I can say that the presentation I saw last evening outlined a lot of useful information. The report itself is not yet available.

I can’t wait to read about the failed domestic shipping services that the TTI team examined. (They looked at successes, too.)

Clearly there are obstacles. There are the perceptions. The operational issues. The insufficient demand, particularly during tough economic times. The potential customer expectations…assuming you can him to the point of talking about expectations.

There are the governmental hindrances. The ingrained logistical practices. The costs of multiple handling of cargo. The scarcity of financing for start-ups.

But wait! There is good news. Folks don’t see the Jones Act as much of a problem. (Seriously, that’s in the report.)

Are we surprised there are many of these obstacles? No. A number of them have been well known. Prime Example: the Harbor Maintenance Tax as applied to non-bulk cargo clearly needs to be addressed.

Can we learn from this study. Yes, indeed.

Truth is, we have a lot to learn. A lot to address.

At the TRB Annual Meeting (as if thousands of people can “meet”) some other things caught my attention.

In the foreseeable future trucking will no longer be at a disadvantage when compared to marine transportation emissions on a ton-mile basis.

When this decade the U.S. implements its self imposed Emission Control Area (ECA or “ee-ka”) limiting emissions within two hundred miles of the coastline vessels will have to adopt use of cleaner fuels, which will put vessels at a complete economic disadvantage vis a vis trucking.

Accepting these at face value, marine highway advocates also will have to address some fact of life environmental obstacles. But then we knew that, too.

Marine highway services are operating in the U.S. now. Ten years hence marine highways will be more a part of the national transportation system. How much of a part of the system will depend on how well government and industry transition marine transport to meet commercial and public needs and do so in a changing environment.

The obstacles in front of us are not fortress walls. The obstacles just show us where we need to get to work. Pbea

Since the notion of American marine highways helping to mitigate landside congestion took root early this decade–along with the call for Federal policy and program–voices have been heard to ask, “so, where is it?” “What happened to those promised new short sea services?” Why isn’t [big box retailer] using coastal shipping?

Cynics who habitually dismiss the competitiveness of U.S. flag shipping eagerly seize opportunity to validate their view. Observers see their doubts re-enforced or just wonder if there is any there there.

Meanwhile, advocates are impatient for government to concur with the public benefits rationale by enacting major policy directives and funding game changing projects. (There is also the understandable impatience of entrepreneurial risk takers whose initiatives could use a short term assist to help establish themselves in the market.)

I count among those seeking a decisive boost for new marine highway operations. But expectations are tempered by the Washington experience. To keep our sanity folks here learn to tolerate the tortoise pace of policy-craft. We look for the smallish increments that represent progress, even as we look to accomplish greater things farther down the road.

Those are the highlights, added to by various research papers and reports. It is worth noting that the above achievements are not the result of a well-funded, cohesive effort by a powerful maritime industry lobby. (Indeed, one might argue that none of those modifiers apply, especially when compared to other transportation sectors.) They largely were achieved by decision-makers coming to recognize the inherent advantages of domestic marine transportation, and with the encouragement of various labor, port, public agency and private sector advocates (as well as the Coastwise Coalition that I chair) who have validated that policy direction.

The rules of the road will help define the market for marine highway services. A prime example is the Hours-of-Service (HOS) regulation that limits the time truck drivers can spend behind the wheel. These are excerpts from American Shipper of October 29, 2009. (The links are mine.)

The hours-of-service rule allows drivers of commercial vehicles to drive up to 11 hours after 10 consecutive hours off duty. The rule also has a 14-hour maximum workday limit so that drivers have to clock off even if they haven’t driven all 11 of their allowed hours. And drivers must take a 34-hour break after being on the job seven or eight consecutive days.

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The trucking industry objected to the original changes five years ago, which added an extra hour to the maximum time behind the wheel but shortened the overall work day and the restart period, but has since adjusted to and supports the current rule.

Trucking companies comply with Federal requirements and adjust operations accordingly. One adjustment may be in how they schedule drivers for long hauls. If the daily allowable driving time is reduced under revised HOS regs then one response could be to substitute vessels for a long leg of the long haul. Instead of dispatching a driver for the full trip put two drivers to work on the short hauls between the origin/destination points and the ports at either end.

The authors of “Operational Development of Marine Highways to Serve the U.S. Pacific Coast,” which recently appeared in the Transportation Research Record (September 2009), see that potential.

Marine highways are viable for longer routes such as those from California to the Pacific Northwest, where truck rates are higher and both distance and trucking hours-of-service regulations permit vessels to be time competitive at lower speeds. (from the abstract)

One of the authors is Ron Silva of Westar Transport, a California trucking firm that understands the operational benefits of a transportation system that would make it possible for trucks to spend time on the water. Pbea

In 2007 Congress approved marine highways as a new policy direction in a measure signed into law by President George W. Bush. The Secretary of Transportation “shall designate short sea transportation routes as extensions of the surface transportation system…” and is authorized to “designate” short sea transportation projects.

Yesterday President Barack Obama signed a bill containing an addition to the policy and program. “The Secretary shall establish and implement a short sea transportation grant program to implement projects or components” of a designated project.

This is a welcome addition to the still new policy initiative to increase marine highway use in the United States. It is a modest but important enhancement of the 2007 law. Money gives meaning to policy. Even if it is just $15 million, the amount that the Administration is prepared to spend if Congress were to appropriate it. (The Senate version of the still unresolved DOT appropriations bill contains funding.) Indeed the Maritime Administration budget plan includes $15 million for each of the next couple of years.

The new grant program is broadly writ. To be eligible to apply for funding a project must be “financially viable” and demonstrate that “a market exists” for the project services. The Federal grant could be no more than 80 percent of the cost for which the money would be used. That use presumably would be to cover capital costs. We will see how the Maritime Administration further defines the new grant program through regulation in the months ahead. Before they do that MARAD will finalize the rulemaking first published for comment in October 2008 regarding the designation of routes and projects. Pbea

If you ask someone to explain the HMT issue the response may be: “It’s a double tax on cargo.” I have heard that lone, simple statement made many times including by an industry witness at a committee hearing. It is how others are coming to know the issue. A key Member of Congress recently explained the issue that same way. Double taxation, period.

The double hit of the ad valorem tax is a valid reason. Imported cargo pays on entering a U.S. port, and then, when transshipped by coastal service to another American port, pays again. But that explanation leaves out an equally important reason for Congress to approve legislation such as the Cummings bill in the House (H.R. 638) or the Lautenberg bill in the Senate (S. 551).

The single hit of the HMT on domestic cargo–much of which moves in trailers–is the other principal reason. Domestic freight represents the greater percentage of goods moving on the roads today…far more than international boxes. When the Port Authority of New York & New Jersey studied trucking in that congested metro region less than 5 percent of the trucks on the road were carrying containers to or from the port. This is hardly surprising.

So whether the cargo is riding in a 53′ trailer, or is a vehicle itself, that is the freight we need to attract to the marine highway. Unlike the imports the domestic freight would pay only once. That also is too much.

If the marine highway is to fulfill our expectation to enhance the surface transportation system and mitigate the interstate burden the J.B. Hunts, the FedExs and other companies should participate in blue and brown water services.

Exempting both international and domestic non-bulk cargo moving in the American domestic trade, and among Great Lakes ports, is the objective. It is a low-cost way to remove a disincentive for the use of efficient marine transportation and signal a policy change to the logistics industry where the business decisions are made.